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On the evening of Oct. 27, 2005, William I. Koch, the billionaire coal and petroleum magnate, attended an invitation-only, haute cuisine dinner and wine tasting at Daniel Restaurant in New York City, owned by the famed French chef, Daniel Boulud. It was a festive and highly exclusive event, sponsored by Scarsdale, NY-based Zachys Wine Auctions, to promote a sale on the following two days titled, “Over 17,000 Bottles of Greatness.” At the dinner, which according to the invitation would offer “a bird’s eye view of collecting at the high end,” the wine offerings included some of those coming up for auction. Among them were a 1947 Château Latour, and a 1950 Château Latour–wines that could fetch about $10,000 at the sale.

Koch didn’t attend the auction but sent a wine consultant, acting on his behalf, to purchase 2,669 bottles of wine at a total cost of $3.7 million. In the process the connoisseur, who is #329 on the Forbes Billionaires list, added to his collection some fine trophy wines that lived up to the catalog’s billing of “the best of the best.” What he didn’t realize at the time was that he had also acquired 24 fakes.

One was a magnum (a 1.5-litre bottle) of 1921 Château Petrus for which Koch paid $29,500 at the Zachys auction. It turned out to be a deftly assembled fake, manufactured by a former perfumer who went into the wine counterfeiting business. His recipe: add fragrance and flavor to 1957 Château Petrus; re-bottle and re-cork; then top it off with a capsule and a custom-manufactured label. Voila!

That bottle became the smoking gun in a case on trial in Manhattan federal court in which lawyers and witnesses are duty bound not to drink the evidence. Koch brought the suit against another avid wine collector: onetime-billionaire Eric Greenberg, who was the consignor of all the wine in the Zachys sale. The catalog did not identify hm, but said he was “incredibly energetic,” and that he amassed his collection “with tremendous thought, energy and great knowledge of wine.” Koch, who could relate to all of this, assumed he was a kindred spirit.

Five years into a lawsuit against Greenberg, he has a different opinion. The case, to recover $355,810, has consumed millions in legal fees. For Koch, it’s largely a matter of principle. Greenberg, the testimony shows, first approached Sotheby’s and Christie’s auction houses about selling part of his collection. The two sides reach opposite conclusions about whether they turned him down because they doubted the authenticity of some of the items.

In the suit, Greenberg contends that he did not know any of the bottles at issue were counterfeit, and that besides, Koch could have determined their authenticity if he had inspected them before the auction.

Ultimately the jury will decide, but meanwhile the case is a cautionary tale for other collectors. For many collectibles, whether baseball memorabilia, vintage designer handbags, antiques, or minerals, counterfeits are rampant. Collectors can learn some cheap lessons from the negative–and positive–experiences this billionaire described in his court testimony this week.

1. Be passionate. People collect for a variety of reasons. Koch, who collects many other things besides wine, testified, “I collect what I love, what makes me feel good, gives me a great sense of peace and enjoyment. Then I collect things that I think are extremely historical, things that I can look back and say this was part of history.” For example, he owns the only picture of Billy the Kid, Jesse James’s gun and the gun that killed Jesse James.

2. Curb your compulsions. Koch rarely sells any of the items in his collections. “My wife calls me a hoarder because I won’t get rid of the stuff,” he said. He has this trait in common with many collectors, and with some people, it can reach extremes. The late psychoanalyst Werner Muensterberger serves up some pathological examples in his book, “Collecting: An Unruly Passion” (Princeton University Press, 1993). They include Thomas Phillipps, a 19th-century British book collector who abandoned his family, then made financing his insatiable habit the main criterion in courting a second wife. Muensterberger, who collected African art, believed that the pursuit of objects helps compensate for deep-seated trauma, anxiety or unfulfilled childhood needs.

3. Become an expert. With wine, in particular, it’s enormously difficult to distinguish the genuine from the fake.Interestingly, the most reliable sign is not the taste, which can vary depending on everything from how the wine has been stored, to the chemistry of the drinker’s saliva. Packaging is often a more reliable indicator; experts pay particular attention to the label and the cork.

Hiring experts to advise you is the next best thing to becoming one yourself. But hiring a pro who has a financial stake in helping you can be problematic. For example, evidence at the trial showed that the consultant who bid on Koch’s behalf at the Zachys sale was paid based on a percentage of the auction sale price.

Although the potential conflict has not been discussed in the testimony, this gave him an incentive to spend money, rather than rule out certain purchases. Neither he nor Koch inspected the wine, although the auction catalog clearly gave them the right to. That could come back to bite them since this detail is a key part of Greenberg’s defense.

4. Inquire about provenance. In the most literal sense, this refers to previous owners of whatever you’re buying. With some items, it adds to their cachet–as it did with Andy Warhol’s cookie jars, Jacqueline Kennedy’s simulated pearls and Rusty Staub’s game-worn warm-up jersey. With wine, provenance goes beyond previous owners to include “how the wine was kept over the years,” Koch noted. “That’s highly important because wine can deteriorate if it’s not kept properly.”

Likewise, if you find out that the item has passed through the hands of a known counterfeiter; a reseller known to have dealt in counterfeit goods; or a collector who’s been duped, that detracts from provenance. Generally speaking, the rarer the item, the more likely the one you have come across is a fake. The magnum of 1921 Château Petrus is a great example of that.

5. Look past the puffery. Auction catalogs, especially high-end ones, are masterfully written. Wine descriptions may include what are called “tasting notes”–highly poetic language by a wine reviewer. It’s there to entice you, but far more important is what the entry says (or doesn’t say) about the condition of what you’re buying. For example, 12 bottles of wine sold together as an auction lot with the description “two water-stained labels, one corroded capsule, one depressed cork,” signals a relatively undesirable (though more affordable) purchase. “Bin-soiled and nicked label” detracts from the value of the wine, while “fully branded cork” adds to it.

6. Read the fine print. Not surprisingly, the lawyers have a hand in writing auction catalogs, too. They are responsible for the very unpoetic, prefab language known as boilerplate. It’s written to protect the auction house against lawsuits by consumers. Unless the auctioneer has committed fraud, the legal lingo you find under a heading like, “Conditions of sale and limited warranty,” will generally get off them off the hook. Words to the wise: By agreeing to buy something “as is,” you accept all its warts.

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